IEC Electronics CEO Discusses F1Q2011 Results - Earnings Call Transcript

IEC Electronics Corporation ( IEC)

F1Q2011 Earnings Conference Call

February 3, 2011 10:00 AM ET

Executives

John Nesbett – President, IMS

Barry Gilbert – Chairman and CEO

Susan Topel-Samek – VP and CFO

Analysts

Mark Jordan – Noble Financial

Jennifer Welford – Comstock Partners

John Walthausen – Walthausen and Company

Robert Little – Morgan Chase

Garry Palmer – Retirement Solutions

Stephen Shaper – Narromine

Gerard McLean – Private Investor

Presentation

Operator

Greetings and welcome to the IEC Electronics Fiscal 2011 First Quarter Earnings Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host John Nesbett, President of IMS. Thank you Mr. Nesbett, you may begin.

John Nesbett

Good morning and thank you for calling in. On the call at this morning, we have Barry Gilbert, Chairman and Chief Executive Officer as well as Sue Topel-Samek, Vice President and Chief Financial Officer.

Before we get started, I’d like to take a quick moment to read the Safe Harbor Statement. This conference call including any discussion regarding the company’s future prospects, contains certain forward-looking statements that involve risks and uncertainties, including uncertainties associated with economic conditions in the electronics industry, particularly in the principal industry sectors served by the company, changes in the customer requirements and in the volume of sales to principal customers, competition and technological change, the ability of the company to control manufacturing and operating costs, the ability of the company to develop and maintain satisfactory relationships with investors sorry with bankers and the ability of the company to efficiently integrate acquired companies into its business.

The company’s actual results and operations may differ materially from those contemplated by any forward-looking statements as a result of these and other factors, including risk factors and Safe Harbor cautionary statements set forth in the company’s 2010 Annual Report on Form 10-K and in other filings with the Securities and Exchange Commission.

We will also be discussing EBITDA, a non-GAAP financial measure that has reconciled to GAAP financial measures in our earnings press release and posted in the Investors Relations section of our website.

Okay. I will now turn the call over to Barry Gilbert. Please go ahead, Barry.

Barry Gilbert

Thank you for joining us this morning. We are committed to communicating with our shareholders through investor presentations and making ourselves available to all shareholders that contact us. With that said, I have held-off of quarterly calls largely because I don’t view our business on a quarter-to-quarter basis. The plan we’ve been executing has taken time to develop and might not have unfolded the way it has if we had been concentrating on quarterly calls and subsequent reactions. We make business decisions based on what is best for the long-term value of the shareholders.

We have not determined if we will do these calls quarterly and we will evaluate that question going forward. However, I can assure you that we are going to do what is right for our shareholders and the owners of the company with respect to communications.

A brief overview of the call and subsequent discussions; we had a strong quarter, healthy growth in sales, healthy growth in earnings. And we continued to extent our capabilities for our customers when we acquired the Southern California Braiding operation and broadened our geographic footprint. I’ll turn the call over to Sue to review the numbers and then I’ll provide you with a bit more operational color before we open the lines for questions.

Susan Topel-Samek

Thank you, Barry and good morning everyone. As you know this morning we issued a press release detailing our first quarter results and we will issue our full report on form on 10-Q before February 15th.

In the meantime, I’m happy to report that IEC continue to experience solid top-line growth. Our first quarter revenue increased 59% year-over-year. These results included the acquisition of General Technology Corporation in December 2009, Celmet in July 2010 and 10 days of Southern California Braiding acquired on December 17th, 2010.

Excluding these acquisitions, our organic growth was a healthy 26%. First quarter growth profit improved to 16% from 15.6% in the prior year period and 10.3% in December 2008. That is after as we indicated in the press release, we incurred approximately $70,000 of net startup expenses of Southern California Braiding. And this after taking into account approximately $200,000 impact on our results of temporarily inefficiencies associated with a number of new projects advanced during the quarter and a higher than usual level of product mix variations.

The progress made in recent years is a direct result of our continued focused on improving efficiency for training, investing in cost affective capital equipment and adopting continues improvement and lien manufacturing principles. As our workforce has expanded, we have achieved these increases in both productivity and capability that have enabled us to further penetrate profitable market sectors.

Selling and administrative expenses remain under 10% of sales, but were 80 basis points higher during the first three months of fiscal 2011 and in the prior year period. Approximately one half of the increase results from the rising cost of providing healthcare and other benefits to our employees, which we view as important to maintaining a top slide workforce. The remainder of the increase is attributable to adding the appropriate talent to support the size and scope of a growing organization, both today’s IEC and the larger company we are working to become.

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